Tricon Capital Group has boosted its US multi-family presence with a $1.4bn (€1.25bn) deal to buy a listed Starlight Group fund.
The North American residential asset manager said it is buying Starlight US Multi-Family (No. 5) Core Fund’s portfolio of 23 US multi-family properties totalling 7,289 units in an all-share deal.
The transaction includes equity consideration of about $496m that will be funded by issuing 50.8m Tricon common shares to the Canada-listed fund’s unitholders. Tricon will also indirectly take on around $916m of the fund’s existing debt.
Following the acquisition, Tricon Lifestyle Rentals multi-family rental portfolio will rise to over 10,000 units, including 3,000 units under development and management in Canada. Tricon’s total assets under management will also increase by $1.4bn, to $7.1bn.
The Starlight US Multi-Family (No. 5) Core fund was established in October 2016 to acquire a portfolio of stabilised multi-family real estate properties in the southern US completed in 2008 or newer.
Tricon said the fund’s portfolio consists of properties, primarily in the Sun Belt markets, with an average vintage of 2012; the assets are primarily garden-style apartment complexes featuring resort-style amenities.
Gary Berman, Tricon’s president and CEO, said: “The transaction will provide Tricon with a significant presence in US multi-family, which is the largest investible property type in residential real estate.”
Berman said the portfolio enhances Tricon’s exposure to high-growth markets and aligns with Tricon’s US rental focus on the middle market demographic.
“With this acquisition, we will have created a strong foundation for future growth as well as a major source of recurring rental income to complement our thriving single-family rental and Canadian build-to-core multi-family rental businesses.”
Daniel Drimmer, CEO and director, Starlight US Multi-Family (No. 5) Core GP, the general partner of the fund, said: “Under Starlight’s management, the income and value of the underlying assets in the fund have grown significantly, delivering a strong internal rate of return for Fund unitholders.”
Drimmer said the sale of the fund is an opportunity for fund unitholders to realise the value on their initial investment on a tax-deferred basis.
“Becoming Tricon shareholders allows us to become a part of a larger and more geographically diversified investment vehicle and provides increased liquidity. Management are pleased to become significant shareholders of Tricon,” Drimmer said.